Forex uncertainties hurt MultiChoice earnings amidst subscriber dip

June 13, 2024 in Business, Companies by Editor

Mawela said MultiChoice was not alone in feeling the challenges of a weak consumer environment, but was proud of the speed and effectiveness of their team in implementing strategic actions to retain customers, safeguard cash generation and drive costs savings which surpassed targets.

MultiChoice Group, the Johannesburg-based multinational pay-tv company, saw subscriber numbers dip during the financial year ending March 2024, while slight increases in revenues and profits were eroded by volatile foreign exchange markets across sub-Saharan Africa.

Nonetheless, in the 12 months, the Group delivered a 26pc trading profit margin in South Africa, while increasing trading profit in the Rest of Africa by 48pc despite challenging macro-economic conditions.

Announcing their results in midweek, Calvo Mawela, the MultiChoice Group CEO said, “While we are not alone in feeling the challenges of a weak consumer environment, I am proud of the speed and effectiveness of the team in implementing strategic actions to retain customers, safeguard cash generation and drive costs savings which surpassed our targets. It is the strength of this team, the quality of the underlying business and the clarity of our strategy which underpins my confidence in delivering on our potential.”

According to latest financials, overall active subscribers declined by 9pc. This was mainly due to a 13pc decline in the Rest of Africa business, with Nigeria, Angola and Zambia most affected, while the South African business was more resilient, declining by only 5pc.

On an organic basis, revenues increased by 3%, however due to weaker local currencies and consumer pressure, reported Group revenue declined by 5% to ZAR56.0 billion (about $3 billion).Trading profit declined by 21pc to ZAR7.9bn ($430 million) also partly due to the costs of relaunching the Showmax channel across 44 markets across the continent.

Mawela said clear strategic milestones were reached, with the group successfully launching Showmax 2.0, SuperSportBet and Moment, all of which are now revenue-generating and supporting the group’s future growth prospects.

Moment officially launched in FY24 and the business played a vital role in the Showmax relaunch stepping up to fill a critical payments gap. In January this year, Moment also began processing MultiChoice’s payments for DStv, reaching a milestone of processing $85 million in payments in early March 2024.

Mawela said, “Four years after setting out a clear strategy of building Africa’s entertainment platform of choice and investing in services to support a broader ecosystem, our three core segments are now fully operational: video entertainment, interactive entertainment and fintech. Our focus now shifts to building on these solid foundations to drive growth in these new areas and on further enhancing business efficiency across our operations.”

Mawela said to counter the challenges around an uncertain economic recovery globally and across the group’s operating footprint, the group will continue to drive business efficiency and cost optimisation, with an increased cost savings target of ZAR2 billion  ($108 million).

MultiChoice remains by far the largest producer of original content on the African continent. In FY24, the group again produced over 6,500 hours of local content and its local content library now has more than 84,000 hours of content, a 12pc increase year-on-year.

Due to a strong focus on retention initiatives, the decline in active subscribers in South Africa was limited to 5%, despite the challenging environment. The base now stands at 7.6 million households.  Power outages experienced on 275 days of the year further discouraged potential subscribers without backup power.

The business in the Rest of Africa faced the toughest macro-economic conditions in its core markets with high, double-digit inflation and extreme depreciation of local currencies, (especially in Nigeria, Angola, Kenya and Zambia) which impacted US dollar revenues by 32pc. The active subscriber base declined to 8.1 million, but effective retention efforts contributed to an improved subscriber mix.

Due to the challenging market dynamics, the short-term focus of this business shifted from subscriber growth to safeguard profitability and cash flows. Several cost-saving initiatives were implemented, including scaling back significantly on decoder subsidies.